Q: My husband and I are retired (65 & 62 years old). We want to buy a condo townhouse. We have $75,000 in cash savings, $85,000 invested in stocks (currently down $149,000 in value from total purchase amount). Three years ago, we sold off some of the stock and showed a loss which gave us $40,000 in future ability to carry the loss forward. We have $50,000 in our TFSAs. Our question is this: Should we sell off the remaining stock investment ($85,000) to apply to a down payment or should we use the TFSA plus some savings to use as the down payment? We have RRSPs accumulated in the amount of $240,000 which we are not using at this time, but will look at a RIF situation when we need more operating cash. Thanks so much.
Asked by Priscilla, White Rock, BC
Buying a new home is an exciting adventure, but I'm guessing it's not the first time you've done this. Since you've phrased your question as "either this or that", I gather you're trying to decide how best to come up with $85K for a downpayment?
My question back to you is this: "What is the rate of return on the stocks compared to the rate of return on the savings and TFSA investments?" If the stocks are paying a 3.5% dividend while the savings and TFSA are earning less than that, it seems evident that you should use the savings and the TFSA money. If the reverse is true, then I'd say sell the stocks and reposition the investments in your TFSA to create a higher yield.
You can't do anything about the past. If the stocks are down in value and they aren't paying good dividends, you just don't know if or when they'll come back in price. Rip off the bandaid...take your losses and move on in the world of home ownership.